5 Buy-Rated Dividend Stocks

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.

While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends and subsequently result in precipitous share price declines.

TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.

These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.

The following pages contain our analysis of 5 stocks with substantial yields, that ultimately, we have rated "Buy."

Starwood Property

Dividend Yield: 6.40%

Starwood Property (NYSE: STWD) shares currently have a dividend yield of 6.40%.

Starwood Property Trust, Inc. engages in originating, investing in, financing, and managing commercial mortgage loans, other commercial real estate debt investments, commercial mortgage-backed securities, and other commercial real estate-related debt investments. The company has a P/E ratio of 15.60.

The average volume for Starwood Property has been 1,947,700 shares per day over the past 30 days. Starwood Property has a market cap of $3.7 billion and is part of the real estate industry. Shares are up 19.7% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Starwood Property as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, compelling growth in net income, good cash flow from operations and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 47.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, STWD's share price has jumped by 32.43%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, STWD should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 37.3% when compared to the same quarter one year prior, rising from $41.03 million to $56.33 million.
  • Net operating cash flow has significantly increased by 308.55% to $34.13 million when compared to the same quarter last year. In addition, STARWOOD PROPERTY TRUST INC has also vastly surpassed the industry average cash flow growth rate of 38.58%.
  • STARWOOD PROPERTY TRUST INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, STARWOOD PROPERTY TRUST INC increased its bottom line by earning $1.78 versus $1.41 in the prior year. This year, the market expects an improvement in earnings ($1.95 versus $1.78).

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BCE

Dividend Yield: 4.90%

BCE (NYSE: BCE) shares currently have a dividend yield of 4.90%.

BCE Inc. provides communications solutions to residential, business, and wholesale customers primarily in Canada. The company has a P/E ratio of 13.42.

The average volume for BCE has been 803,400 shares per day over the past 30 days. BCE has a market cap of $35.6 billion and is part of the telecommunications industry. Shares are up 7% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates BCE as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, notable return on equity, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • BCE INC has improved earnings per share by 46.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, BCE INC increased its bottom line by earning $3.39 versus $2.87 in the prior year.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, BCE INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • 47.10% is the gross profit margin for BCE INC which we consider to be strong. It has increased from the same quarter the previous year.
  • Net operating cash flow has slightly increased to $863.00 million or 2.98% when compared to the same quarter last year. Despite an increase in cash flow, BCE INC's cash flow growth rate is still lower than the industry average growth rate of 35.78%.

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W. P. Carey

Dividend Yield: 4.70%

W. P. Carey (NYSE: WPC) shares currently have a dividend yield of 4.70%.

W. P. Carey Inc. is an independent equity real estate investment trust. The firm also provides long-term sale-leaseback and build-to-suit financing for companies. It invests in the real estate markets across the globe. The company has a P/E ratio of 54.00.

The average volume for W. P. Carey has been 273,300 shares per day over the past 30 days. W. P. Carey has a market cap of $4.7 billion and is part of the real estate industry. Shares are up 31.8% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates W. P. Carey as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, increase in net income, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • WPC's very impressive revenue growth greatly exceeded the industry average of 16.4%. Since the same quarter one year prior, revenues leaped by 181.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 42.79% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, WPC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 70.3% when compared to the same quarter one year prior, rising from $9.09 million to $15.48 million.
  • Net operating cash flow has significantly increased by 180.02% to $48.90 million when compared to the same quarter last year. In addition, W P CAREY INC has also vastly surpassed the industry average cash flow growth rate of 38.58%.
  • The gross profit margin for W P CAREY INC is rather high; currently it is at 68.90%. Regardless of WPC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WPC's net profit margin of 9.32% is significantly lower than the industry average.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Microchip Technology

Dividend Yield: 4.10%

Microchip Technology (NASDAQ: MCHP) shares currently have a dividend yield of 4.10%.

Microchip Technology Incorporated engages in the development, manufacture, and sale of semiconductor products for embedded control applications. The company has a P/E ratio of 48.21.

The average volume for Microchip Technology has been 1,973,500 shares per day over the past 30 days. Microchip Technology has a market cap of $6.8 billion and is part of the electronics industry. Shares are up 6.5% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Microchip Technology as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 17.0%. Since the same quarter one year prior, revenues rose by 26.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 130.44% to $128.91 million when compared to the same quarter last year. In addition, MICROCHIP TECHNOLOGY INC has also vastly surpassed the industry average cash flow growth rate of -56.72%.
  • Despite currently having a low debt-to-equity ratio of 0.50, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 6.07 is very high and demonstrates very strong liquidity.
  • MICROCHIP TECHNOLOGY INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, MICROCHIP TECHNOLOGY INC reported lower earnings of $1.66 versus $2.20 in the prior year. This year, the market expects an improvement in earnings ($1.84 versus $1.66).
  • The gross profit margin for MICROCHIP TECHNOLOGY INC is rather high; currently it is at 54.00%. Regardless of MCHP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MCHP's net profit margin of 2.44% is significantly lower than the industry average.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

Boardwalk Pipeline Partners

Dividend Yield: 7.00%

Boardwalk Pipeline Partners (NYSE: BWP) shares currently have a dividend yield of 7.00%.

Boardwalk Pipeline Partners, LP, through its subsidiaries, engages in the ownership and operation of integrated natural gas and natural gas liquids (NGLs) pipelines, and storage systems in the United States. The company also transports, stores, gathers, and processes natural gas and NGLs. The company has a P/E ratio of 22.36.

The average volume for Boardwalk Pipeline Partners has been 607,400 shares per day over the past 30 days. Boardwalk Pipeline Partners has a market cap of $6.4 billion and is part of the energy industry. Shares are up 23.1% year to date as of the close of trading on Tuesday.

TheStreet Ratings rates Boardwalk Pipeline Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, expanding profit margins, good cash flow from operations and compelling growth in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 1.1%. Since the same quarter one year prior, revenues slightly increased by 9.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Oil, Gas & Consumable Fuels industry average. The net income increased by 20.8% when compared to the same quarter one year prior, going from $74.60 million to $90.10 million.
  • The gross profit margin for BOARDWALK PIPELINE PRTNRS-LP is rather high; currently it is at 62.00%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.66% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $161.40 million or 49.58% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 20.63%.

New From TheStreet: Jim Cramer's Protégé, Dave Peltier, only buys dividend stocks that have the potential for a 3% to 4% yield and 10% growth. Get his best picks for less than $50/year.

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Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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